When considering which assets to leave your beneficiaries, there’s one asset that’s loaded with taxes: IRAs. Inheriting an IRA is very different from inheriting a Roth IRA. In fact, without proper planning, as Peter Richon with Richon Planning explains to Erin Kennedy, the #irs may end up being your largest beneficiary!

Distributions from an inherited Roth account are both tax and penalty free, which means you won’t saddle your heirs with a heavy tax burden during their prime earning years.

If you have any questions about your financial legacy, or if you’d like to learn more about strategic tax planning to ensure your family receives the most tax-efficient gift possible, please feel free to reach out to Peter by calling (919) 300-5886 or by visiting

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Financial and retirement planning for clients across North Carolina and beyond
Located in Fuquay Varina, NC at 600 Stellata Dr.

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DISLAIMER:
Investment advisory services offered through Brookstone Capital Management, LLC (BCM), a registered investment advisor. BCM and Richon Planning, LLC are independent of each other. Insurance products and services are not offered through BCM but are offered through individually licensed and appointed agents with Richon Planning, LLC. Brookstone Capital Management (BCM) and its Investment Advisor Representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interests of our clients and to disclose any conflicts of interests and all associated fees. Please refer to the BCM firm brochure (Form ADV 2A) for additional information regarding the fiduciary standard….(read more)

LEARN MORE ABOUT: IRA Accounts

TRANSFER IRA TO GOLD: Gold IRA Account

TRANSFER IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

As a responsible individual, you understand the importance of financial planning. You make sure that you have enough savings and investments to secure your own future and that of your loved ones’. However, have you thought about what will happen to your hard-earned money once you are gone? This is where conversion as a gift to your beneficiaries comes in.

Conversion is the process of changing a traditional IRA (Individual retirement account) or 401(k) to a Roth IRA. In a traditional IRA or 401(k), you contribute money before taxes, and your contributions grow tax-free until you withdraw them in retirement. However, when you withdraw the money, you will have to pay taxes on it. In a Roth IRA, however, you pay taxes on the contributions before you contribute. But once you retire, you can withdraw the money tax-free.

Why is conversion important?

One of the benefits of conversion is that it allows you to avoid the required minimum distributions (RMDs), which are mandatory distributions that traditional IRAs and 401(k)s require you to withdraw at the age of 72. The RMDs are taxed as ordinary income, which could significantly increase your tax bill.

By converting to a Roth IRA, you can bypass the RMDs and create a tax-free stream of income for your beneficiaries. This is particularly beneficial if you plan to leave your IRA to your children or grandchildren. They can inherit the Roth IRA and continue to grow the account tax-free as long as they take required minimum distributions. This can be a significant gift to your loved ones, especially if they are in a lower tax bracket than you are.

Another advantage of conversion is that it allows you to lock in your future tax rates. If you think that your tax bracket will be higher in the future, it may be beneficial to convert now. By paying taxes today, you can avoid paying higher taxes in the future.

However, it is essential to note that conversion is not suitable for everyone. If you expect to be in a lower tax bracket in the future, it may be best to stick with a traditional IRA or 401(k). Also, if you do decide to convert, you will need to pay taxes on the conversion amount. This can be a substantial amount, so it is vital to consult with a financial advisor to determine if conversion is the best option for you.

In conclusion, as you plan for your financial future, it is also crucial to consider what will happen to your assets after you are gone. Conversion can be a useful tool to secure your loved ones’ future by creating a tax-free stream of income for them. It is essential to evaluate your options and seek professional advice to determine if conversion is the best option for you. By making the right decisions now, you can give your beneficiaries a valuable gift that will last a lifetime.